BHP sees batteries as electric vehicle tipping points

The key parameters for judging when electric vehicles (EVs) have reached a mass-market tipping point are all battery related — focusing on cost, range and charging, UK-Australian resources firm BHP said.

"With EVs, as we have not yet reached the point where the product is superior to internal combustion engine vehicles, we must first project if and when we will reach the tipping point for mass market consumer preferences," said Huw McKay, BHP's vice president of market analysis and economics.

EV battery packs now cost less than $180/kWh, down from $290/kWh two years ago and around $1,000/kWh earlier this decade. Annual battery costs have declined by an average percentage rate in low-20s/yr for the past few years.

"We agree with the consensus position that when battery pack costs fall to $100/kWh, EVs become cost competitive in the mass market – with a "people's EV" very likely to emerge," McKay said in a blog on the company's website.

"Just how competitive EVs will be on an all-in basis once today's purchasing cost disadvantage is neutralised will depend upon the ability of manufacturers to increase their range – the ability to go at least 200 miles (320km) on a single charge is the threshold – as well as the speed and availability of charging infrastructure."

BHP has increased its "lowest plausible" electric vehicle penetration rate in the global light vehicle fleet to 7pc by 2035 and 27pc by 2050, from previous rates of 5pc and 21pc respectively. Its "highest plausible" penetration rates have risen to 36pc in 2035 and 75pc by 2050.

There are 132mn electric vehicles on the world's roads by 2035 and 561mn by 2050 under BHP's low case scenario. The high case scenario boosts the numbers to 700mn by 2035 and 1.6bn by 2050.

"In terms of commodity demand, the first 100mn EVs on the road are expected to reduce global oil demand by 1.3mn b/d; our mid-case EV production will provide cumulative net copper demand of 17.3mn t out to 2035, an average pace of close to 1mn t/yr; while the mid-case EV fleet will consume around 5pc of the world's electricity at mid-century," McKay said, reiterating previous company forecasts.

BHP's EV scenario cases, consistently applied across its portfolio, "are essential to establishing the plausibility of our long run copper, nickel, oil and power demand ranges." This flows into price estimates "and our assessments of the relative attractiveness of commodities inside and outside our portfolio", he said.

BHP has a strong foothold in the nickel sulphate market through its Nickel West subsidiary in Western Australia, which is increasing output to 100,000 t/yr to make it the world's largest producer. It is considering doubling this output to 200,000 t/yr to meet demand from EVs and energy storage.

Nickel is likely to be a significant beneficiary from automakers' increasing preference for NMC 811 (nickel, manganese, cobalt) and NCA (nickel, cobalt, aluminium) composition for the cathodes of EV lithium-ion batteries.